Public money down the drain

CAG faults EPC system for Jala Yagnam projects

Hyderabad : "Engineering-Procurement-Construction (EPC) system being used in the State for the implementation of major projects is not suitable for executing the irrigation projects of the State and the public money worth crores of rupees are being wasted with the system". This is what the Comptroller and Auditor General was understood to have observed in his report on Jala Yagnam projects, due to be tabled in the Assembly in the current session.

The CAG has reportedly pointed out that the EPC was introduced only to financially benefit the contractors, but not the State government. The fact that the EPC system would not suit the implementation of the irrigation projects was established in the rest of India as well as all over the world. Different states in India had understood the lacunae and they were trying to come out from the flawed EPC system.

Referring to the implementation of the 82 Jala Yagnam projects in the State, CAG said that EPC was draining the public funds in a most alarming way and the government should review it. In EPC system, the contractors who obtained the irrigation projects were free to design, procure the land and other material and undertake construction according to their convenience. Since they had little regard for the projects, the public finances are being drained into the pockets of contractors without proper check, CAG observed.

CAG has also found fault with the mobilization of advances under the EPC system. As per the EPC, the contractors would be paid three per cent of the total cost of the project as mobilization advances well in advance, CAG is said to have observed in the report. With this, the private companies that got the tenders of various irrigation projects commenced the works with the funds released by the government as mobilization advances. "No money of the contractor is being involved in the system and they started the works with the public money", CAG noted.

Surprisingly, CAG observed that the works of various irrigation projects are being divided in such a manner as to only benefit the contractors but not the government. As per the details, the government had spent Rs 65,319 crore so far against the administration cost of Rs 1.85 lakh crore under the Jala Yagnam projects. The contractors were paid Rs 1989.57 crore as mobilization advances out of Rs 65,319 crore. It means the companies started the works with the government money, not from their accounts.

As per the EPC itself, for the survey of the work, the amount to be paid should be not more than 0.5 per cent of the total cost of the work, but in almost all the cases, the amount paid for the survey was 6-8 times more than the prescribed limit. For example, a whopping Rs 958.86 crore or 3.5 per cent of the total cost, was paid for over 25 works of the Dr Ambedkar Pranahita-Chevella Sujala Sravanthi project.

A total ten works under the Jyothi Rao Phule Dommugudem- Nagarjunasagar Sujala Sravanthi project received excess payment for the survey. For example, a Hyderabad-based M/S SEW-MEIL-ZVST AAG (JV) received Rs157 crore for the survey work that actually had a provision for only Rs 19 crore. Meil-Maytas-AAG (JV) pocketed Rs 97 crore as against the provision of Rs 7.43 crore for another survey and Ramky-ZVS-Progressive was paid Rs 157 crore for a survey when the provision was for just Rs 11.43 crore.

In other words, the contractors, who managed to get government funds in the name of mobilization advances, did not commence the land acquisition and other works immediately after getting the money. They were benefited by way of earning interest over the mobilization funds deposited in their accounts. Later, these contractors approached the government to hike the cost by arguing that the escalation of costs called for an upward revision of the estimated cost. Under Jala Yagnam, the State government has grounded 82 projects; about 14 have been completed; 68 are in different stages of construction. Fifty percent of these projects are below 50 percent level of completion.

A Ravindra Seshu